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Understanding the definition of alimony and how it affects taxes

Broward County couples who are looking for a divorce may be interested in how alimony payments may affect their taxes. The answer generally depends on some specific qualities of the payments themselves.

When a person has to pay alimony to their former spouse after a divorce, this can have some serious implications for both parties on their federal income taxes. The person who is making the payments is allowed to deduct those payments on their tax return, resulting in less taxable income. The ex-spouse receiving alimony, however, needs to declare these payments as income on their own return. Each spouse must give the other their social security number so that it may be included on their respective taxes. Failure to do this may result in penalties levied by the IRS.

Not all of the money paid as spousal maintenance or to a former spouse counts as alimony, however. For instance, child support payments and any voluntary payments to an ex-spouse are not alimony as well as any property settlements not made in cash. The former couple must not be filing a joint return and the payments must be made as part of a written divorce or separation settlement. That settlement agreement cannot have any terms in there stating that the payments are not alimony. Additionally, the payments must be made in cash, check or money order to the other spouse.

There are other requirements that must be met in order for payments to be defined as alimony. An attorney may be able to assist a person in determining spousal support and other alimony issues during the divorce. The attorney may also be helpful in representing that person during negotiations with their former spouse before agreeing to an ongoing legal obligation to pay.

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